Home is the basic need of every individual apart from food. In this age to get a home of own is a primary requirement as well as most sought need of every individual. Owning a home is the dream of the individual in his or her life. In the past, it is always a dream for those come under the mid-range category. However, with the help of bank loan and other financial support, even people from middle class also buy a new home now. Buying a house is an exciting milestone and is a sign that your rent-paying days have gone away now. However, it also indicates that a huge amount of mortgage debt and need to pay thousands of rupees as interest.
Should You Repay Your Home Loan?
For some people, the mortgage is considered as the good debt. This is because they are largely using the bank’s money in order to purchase the home that will increase over time called as leverage. If you give first preference for paying off your credit card or other bad debt, then there are many times where it can make sense to pay off the mortgage as soon as than 30 years or 15 years loan that you have taken out. Like the advantage and disadvantage of taking a home loan, here you can see the advantage and disadvantage of prepaying your home loan.
The advantages of prepaying your home loan:
The most significant advantage of prepaying the home loan is saving on the net interest.
In fact, prepaying the home loan make you retain the complete ownership of your house earlier than you planned.
You will own your house free and clear sooner. For many individuals, this gives a huge amount of comfort.
Building up equity will offer you more flexibility when you need to move or even borrow money against your home for business or other investments.
The highly leveraged home can easily become a burden when times get tough.
You can able to keep more money in your pocket.
The typical home loan can costs two to three times the actual loan amount in interest. This means that amount will be yours rather than your banker’s when you are prepaying the home loan.
When prepaying the home loan, you can avoid longer loan tenure, and the more interest amount needs to pay.
The disadvantages of prepaying your home loan:
If the interest rate is low on your home loans, then you do not get a large bang for your pocket by prepaying.
Home equity is not considered as liquid assets. It is very easy to borrow against your home when your financial condition is good. However, if you run into financial problems, then you may have to face trouble qualifying for a home loan.
Even you may lose some tax benefits of deductible mortgage interest.